Proper Enforcement of Court Decisions as a Tool for Combatting Corruption. Column by Oleh Mykhaliuk for Yurydychna Gazeta

According to the results of 2023, Ukraine ranks 104th among 180 countries according to the corruption perception index, while the implementation of effective anti-corruption mechanisms is determined among the criteria for membership in the European Union. Prevention of corruption currently remains one of the key factors not only for establishing the rule of law, but also for ensuring transparency and integrity in the process of rebuilding Ukraine.

It is well known that corruption risks are present in all spheres of life. Corruption as a phenomenon cannot be eradicated completely, but its level can be reduced to the minimum possible under any given conditions. Best practices for compliance in the corporate sector show that preventing corruption costs a business much less than dealing with the consequences of corruption or corporate fraud.

Commissioned by EU Project Pravo-Justice sociological research confirms that the field of enforcement of judicial decisions remains vulnerable to corruption risks and abuses. Some 20% of respondents encountered corruption among SEOs, while 48% heard of it existing among representatives of the State Enforcement Service (similar figures for PEOs are only 3% and 32%, respectively).

The field of enforcement of court decisions may rightly be considered a zone of increased risks of corruption, as some completely opposite interests and motives of debtors and creditors interfere, and the enforcement officer may end up in the zone of influence of one of them.

Their reasons of corruption risks can be understood thanks to the concept, which is called the Fraud Triangle. It is used not only to explain the causes of corporate fraud, but also in respect of corruption in the broadest sense. In its essence, the “fraud triangle” is a system of factors that, in combination, create favourable conditions for certain abuses. Its main elements are: pressure, opportunity, and rationale.

Let us try to find out what each of the elements of the “fraud triangle” means for the field of enforcement of court decisions. First, it is worth mentioning that all these factors can apply to both parties to enforcement proceedings (debtor and creditor) and public or private enforcement officers. The first would be the element of pressure, which may be caused be any situation in life, for example, a complicated financial situation of the debtor; the creditor’s aspiration to receive recovery as soon as possible “bypassing” the existing procedure; a complicated financial situation of the enforcement officer; personal debt obligations of the enforcement officer himself/herself; pressure from management; other difficult life circumstances, etc. The list of such factors can very long for each of the participants. In the conditions of martial law, the pressure factor increases significantly and can be a catalyst for corruption-related practices.

Opportunity (or sometimes this factor is called the perception of opportunities) includes situations when a person sees weaknesses in internal control in certain processes and uses them to his/her personal advantage. In the situation of forced execution of court decisions, this factor may include gaps or clashes in legislation; deficiencies in the record-keeping system; vulnerability of IT resources of judicial bodies, the State Enforcement Service, or PEOs, etc. Such loopholes can be used both by parties to enforcement proceedings and by EOs with unethical purposes.

The last element of the “fraud triangle” is rationale. As a factor in fraud or other abuses, rationale allows the perpetrator to justify his/her unlawful actions to himself/herself and in the eyes of others. For example, a debtor who evades the execution of a court decision may be convinced that the decision is unfair to him or that the rest of the debtors also fail to fulfil their obligations, etc. In the creditor’s case, he/she may be of the opinion that without recurring to unethical practices, one will not be able to enforce the decision, or that such behaviour is generally acceptable, or may be telling himself/herself that the debtor is anyway guilty before him/her, and so on. For his/her part, the EO may justify receiving an illegal reward from one of the parties by the low level of remuneration; by the fact that others also do this; or that he/she deserves more for his/her efforts, etc.

Thus, to overcome the risks of corruption in the field of enforcement of court decisions, the State and the professional community need to work with all factors at a time: pressure; opportunity, and rationale in the context of debtors, creditors, and enforcement officer.

In order to reduce the number of cases that create opportunities for abuse in the field of enforcement of court decisions, the State Anti-Corruption Program suggests a set of measures, which include improving enforcement-related legislation. The measures are mostly aimed at digitization of enforcement of court decisions; automation of seizure of funds and property; introduction of effective judicial control; expansion of opportunities for PEOs. In our opinion, improving the relevant legislation, in addition to significantly reducing corruption risks, will allow achieving greater efficiency in the execution of court decisions.

At the same time, one should not forget that it is extremely difficult to overcome such a factor of corruption as rationale, solely by improving the legislation. In our opinion, overcoming this factor will become possible through raising legal awareness and fostering a culture of voluntary execution of court decisions. In particular, there is a need to introduce incentives for debtors from both private and public sectors to comply with court decisions without coercive mechanisms being used. This is especially relevant in cases where we are talking about the execution of decisions of a binding nature, which do not envisage the recovery of money from the debtor, and the execution of the decision mostly depends on the debtor’s good will.

Oleh Mykhaliuk, Key Expert on Economic Justice, EU Project Pravo-Justice.

The text has been first published in Yurydychna Gazeta.